Trading Plan- Your Secret To Success In the Share Market

We have all heard the statement ‘If you fail to plan, you plan to fail’. So powerful are these words, yet so few seem to grasp the essence of what they really mean. For years, I have listened to literally thousands of people around Australia share their desire to be financially free.

For some, however, it is more an overwhelming desire to just get out of debt, let alone invest. Each of the personal stories I have listened to have reasons as to why they are where they are. Although each story had its own personal circumstances, they were all intrinsically the same.  You are today where you planned to be! No more, no less. 

Success does not come by accident it is created.

Do you have what it takes?

Many people have asked me to show them how they can create wealth. In most cases they expect that I will give them the ‘holly grail’ of investing, the one thing that will make them millions. Instead, I ask them a question “Do you have a budget?” You know that great wealth creation vehicle that many suggest you should have to help you become financially independent. If you are like most people, you think ‘budget’ is a four-letter word that is too hard to do, that will restrict your spending, hamper your lifestyle and generally make you miserable.

The fact is that none of this is true; a budget is simply a financial plan to succeed.

A budget lists your income and expenses, and lays the foundation as to how you either invest or spend your money. It allows you to have more freedom, more security and more wealth. Quite simply, it provides you with the flexibility to plan for the future, but more importantly take control of your life today and put you on the right path for your future.

In the share market, your trading plan is a plan to succeed just like a budget.  However, just like budgets, 9 out of 10 people do not have a plan or if they do, they do not stick to it. Therefore, if you are not planning for success you are planning to fail.

Why Do We Need a Trading Plan?

So we can get exactly where we want to go and have exactly what we want. If you have never been somewhere before, it is very unlikely you will ever get there unless you have a road map.

When we trade, we want to do so with the highest probability of success. With this in mind, and knowing that as humans we can become very emotional, we need to develop a set of rules that are measurable, logical and most importantly repeatable. I am sorry to say but ‘gut feel’ is not one of those repeatable rules. The rules have to be consistent in their application rather than subjective. The more subjectivity, the more our emotions play with our decisions and consequently affect the outcome. A good trading plan, like a budget, will work for you if you work it. The results may be slow and inconsistent at times, however, if it is a good trading plan it will look after you for the long term. Remember, the laws of compounding will work for you if you let them.

The laws to becoming wealthy are very simple:

1. Spend less than you earn;
2. Invest your surplus wisely (at least 10% of you income); and
3. Leave it alone so it can grow for you – allow it to compound.

So How Do We Do That?

After you establish a budget and free up some cash to invest, you then need to gain the knowledge to develop and implement a successful trading plan. Once you have done that you should then test your trading plan to make sure you can be successful with it. This is probably the most important part of the process. It is interesting to see people get hold of a trading plan, try to implement it, add things to it, change it and then wonder why it does not work for them. Remember the old saying ‘if it ain’t broke don’t fix it’.

I have met people that have given up after only one or two trades believing that a plan does not work just because they made a loss. Then they either give up all together or set off to try to find another way. I could share with you literally hundreds of stories of people who have not succeeded in the share market because of one simple reason, they cannot or would not follow a simple plan to succeed. Often this is because they lacked knowledge, patience or experience.

The trading plan I currently use, I paper traded with no money for at least 12 months. Now why would I do that? Surely, I could have made lots of money during that year. Well I could have; however, I could have lost it too. The important point to remember here is that if I physically work for one hour to earn $10, and then I put that money on a share hoping to win and I in fact lose, that $10 can never be replaced. It is impossible for me to work that hour again, so why would I put my hard-earned capital at stake unless I am very sure that I have a high probability of success. This may sound too simple; however, the best and most successful people I have met who trade and invest in the share market are ones that test everything.

Enrol in the Your Trading Mentor ten lesson course and learn how to determine the right time to buy and sell, so you get more winners than losers, money management rules to keep you safe and create you own successful trading plan.

Do not risk your capital if you are not sure you can succeed!

If all you think about is how much money you can make from trading the market and not how much you can lose, then you are gambling, which is fraught with danger as it will cost you dearly. I have met literally hundreds of people with this type of mindset and they are highly unlikely to succeed in their endeavours to profit from the market. Trading is about minimising risk, not maximising profits.

You need to test two things in regards to your trading plan; the first is you need to test the trading plan itself to see if it actually works. Do not blindly believe what you read in a book or what someone has told you, especially if that person is a supposed guru with a magic formula given to you at his/her special seminar.

No matter how you got your trading plan, test it for yourself to see if it actually works! I have met far too many individuals that have lost over $100,000 by not testing a plan given to them by supposed experts. I do not care how successful the person looks or who gave you the trading plan, what I care about is that you are successful with your own trading. Therefore, my recommendation to you is TEST IT!

The second thing you need to test is yourself; how do you know you can trade or invest successfully? I could theoretically give you a magic trading plan that will make you millions, however, if you cannot follow the plan then you will fail. Anyone can pick shares to buy; eventually one will go up. However, picking shares that go up consistently and getting into them at the right time is another thing all together.

Add to this the difficulty that traders and investors find themselves in when it comes to selling shares. This may sound strange after all, if you have made money from a stock wouldn’t you want to cash in to take the profit or if you were losing wouldn’t you want to sell to minimise your loss? And herein lies the problem, emotions!

Our emotions often dictate the actions we take. When you buy a stock, you are looking to make money and lots of it. You have to be in it to win, as they say, however this is where our greed mentality can take over from rational thinking. You see if we had held a stock and made money, lets say 20% in 6 months, but then the stock falls and our trading rules say to sell, often the same greed factor for a buying a stock comes into play. The greedy little person inside our head can be heard saying ‘it could go higher, so why get out now’.

Another good one I have heard ‘if only it gets back up to where it was before I will sell’. There is a multitude of reasons why we do what we do, however what is important is that you realise that you are in a loss, your money is going out the door and you should sell.

This is why you should always test not only the trading plan to see if it works, but you also need to test yourself to see if you can work the plan to succeed. Managing yourself is far more important in trading than the rules in your trading plan. This is because your disciplined approach and attitude towards trading will ultimately determine your success.

It is quite simple really: if you have a brilliant trading plan yet you cannot consistently follow the rules then you will lose. Your death in trading may be fast and furious or slow and painful; however your death is assured if you do not have a plan to succeed.

Check out a story of one trader who achieved success here

Dale Gillham is the director and founder of Wealth Within, an Australian-based company specialising in share market education and independent investment advice. Dale is the author of the book ‘How to Beat the Managed Funds by 20% and Australia’s first and only accredited Diploma of Share Trading and Investment. For information visit